| In order to improve your credit scores which make up | | | | factors used to create your FICO score are: |
| your credit reports it is important to understand the | | | | payment history; outstanding balances; length of history; |
| FICO business and scoring model. | | | | type of credit; and inquires. The overall score is a |
| FICO stands for Fair, Isaac and Company and was | | | | weighted average of each of these factors. The |
| founded in 1956 by Bill Fair an engineer and Earl Isaac | | | | score breaks down with 35% of your overall score |
| a mathematician. In 1958, they began selling the first | | | | related to payment history, outstanding balances make |
| credit scoring system these systems were used to | | | | up 30% of your score, the length of credit history has |
| help companies evaluate credit worthiness and they | | | | a 15% impact on your overall score, type of credit has |
| continued producing and selling these systems. In | | | | a 10% impact on your score, and the amount of |
| 1987, the company went public and created a new | | | | inquiries accounts for the final 10% of your overall |
| predictive general purpose credit scoring model | | | | scores. Generally, a credit score of 720 and above is |
| affectionately known as the FICO score. This score | | | | considered excellent, 680 - 720 is considered good, |
| was originally named the Beacon score and was used | | | | 620 - 680 is considered fair, and 619 and below is |
| to determine which borrowers were most likely to | | | | considered poor. |
| default on a loan. In 2003, the companies name was | | | | In 2006, the three credit bureaus created a company |
| changed to the Fair Isaac Corporation. | | | | called VantageScore Solutions. This company was |
| The general purpose FICO scoring model was | | | | created to start a new credit scoring model to |
| adopted by all three major credit bureaus Equifax, | | | | compete with FICO. The two companies have been |
| Transunion, and Experian. The FICO score ranges | | | | in ongoing litigation regarding the two scoring methods |
| between a low of 300 and a high of 850. The higher | | | | and the results have not been finalized. However, a |
| the score the better credit risk a borrower is | | | | majority of businesses and lenders still use FICO as |
| considered. The FICO scoring model uses five | | | | the main credit scoring model. |
| factors to determine the likelihood of default. The five | | | | |